During the last fiscal year, the Skeletal Biology Section reports activities in all three areas. 1) Biological activity of stem cells &#8232;&#8232;&#8232; &#8232; Human pluripotent stem cells (hPSCs) have two potentially attractive applications: cell replacement-based therapies and drug discovery. Both require the efficient generation of large quantities of clinical-grade stem cells that are free from harmful genomic alterations. The currently employed colony-type culture methods often result in low cell yields, unavoidably heterogeneous cell populations, and substantial chromosomal abnormalities. We have compared the structural relationship between hPSC colonies/embryoid bodies and early-stage embryos in order to optimize current culture methods based on the insights from developmental biology. We identified core signaling pathways (including those initiated by TGF-beta) that underlie multiple epithelial-to-mesenchymal transitions (EMTs), cellular heterogeneity, and chromosomal instability in hPSCs. We also analyzed emerging methods such as non-colony type monolayer (NCM) and suspension culture, which provide alternative growth models for hPSC expansion and differentiation. Based on the influence of cellcell interactions and signaling pathways, we propose concepts, strategies, and solutions for production of clinical-grade hPSCs, stem cell precursors, and mini-organoids, which are pivotal steps needed for future clinical applications. 2) BMSCs/SSCs in disease&#8232;&#8232;&#8232;&#8232; In keeping with our interests in skeletal diseases (in particular, fibrous dysplasia of bone in collaboration with Dr. Michael T. Collins in the Skeletal Clinical Studies Unit, CSDB, NIDCR), we have continued to study possible treatments for this disease. Fibrous dysplasia (FD) is a rare skeletal disorder, resulting in deformity, fracture, functional impairment, and pain. It arises from mis-functioning SSCs/BMSCs. Bisphosphonates have been advocated as a potential treatment, due to the fact that FD lesions are often characterized by exuberant osteoclastogenesis, induced by the abnormal SSCs/BMSCs. Furthermore, in another brittle bone diseases, Osteogenesis imperfect, bisphosphonates were found to improve bone volume and density. To determine the efficacy of the bisphosphonate, alendronate, a two-year randomized, double-blind, placebo-controlled trial was carried out. Subjects with polyostotic FD were randomized and stratified by age. Alendronate was administered over a 24 month period in 6 month cycles (6 months on, 6 months off). Primary endpoints were bone turnover markers, including serum osteocalcin and NTX-telopeptides. With respect to bone turnover makers, there was a decline in NTX-telopeptides in the alendronate group, but no significant difference in osteocalcin between groups. The alendronate group had an increase in areal bone mineral density in normal bone at the lumbar spine, and in pre-determined regions of FD, but there were no significant differences in pain scores, skeletal disease burden scores, or functional parameters between the groups. These results showed that alendronate treatment did lead to a reduction in the bone resorption marker, NTX-telopeptides, and improvement in aBMD, but no significant effect on serum osteocalcin, pain, or functional parameters was observed. 3) Stem cells in tissue engineering and regenerative medicine The ability to differentiate induced pluripotent cells (iPSCs) into committed skeletal progenitors could allow for an unlimited autologous supply of such cells for therapeutic uses. Therefore we attempted to create novel bone-forming cells from human iPSCs using lines from two distinct tissue sources (skin fibroblasts and BMSCs), and methods of differentiation that we previously devised for osteogenic differentiation of human embryonic stem cells (hESCs), and as suggested by other publications. The resulting cells were assayed using in vitro methods, and the results compared to those obtained from in vivo transplantation assays. Our results showed that true bone was formed in vivo by derivatives of several iPSC lines, but that the successful cell lines and differentiation methodologies were not predicted by the results of the in vitro assays. In addition, bone was formed equally well from iPSCs originating from skin or BMSCs, suggesting that the iPSCs did not retain a memory of their previous life. Furthermore, one of the iPSC-derived cell lines formed verifiable cartilage in vivo, which likewise was not predicted by in vitro assays. Future studies will aim to take a more developmental approach to obtain consistent generation of bone forming cells. While iPSC-based cell therapies have a great potential for regenerative medicine, they are also potentially associated with tumorigenic risks. Current rodent models are not the optimal predictors of efficiency and safety for clinical application. Therefore, we developed a clinically relevant non-human primate model (Rhesus monkey) to assess the tumorigenic potential and in vivo efficacy of both undifferentiated and differentiated iPSCs in an autologous setting without immunosuppression. Undifferentiated autologous iPSCs formed mature teratomas in a dose-dependent manner. However, tumor formation was accompanied by an inflammatory reaction. On the other hand, iPSC-derived mesodermal stromal-like cells formed new bone in vivo without any evidence of teratoma formation. We therefore showed for the first time in a large animal model that closely resembles human physiology that undifferentiated autologous iPSCs form teratomas, and that iPSC-derived progenitor cells can give rise to a functional tissue in vivo.